Perpetual Trustee Co Ltd v Federal Commissioner of Taxation [1931] HCA 20; (1931) 45 CLR 224 (4 June 1931)

Perpetual Trustee Company Limited Appellant; and The Federal Commissioner of Taxation Respondent.

The question stated for the opinion of the Court arises upon sec. 8 (5) of the Estate Duty Assessment Act 1914-1928. It is as follows: "Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, or public educational purposes in Australia or to a public hospital or public benevolent institution in Australia or to a fund established and maintained for the purpose of providing money for use for such institutions or for the relief of persons in necessitous circumstances in Australia." This provision replaced a sub-section in the Act of 1914-1922 which read: "Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, charitable or public educational purposes."

The amendment seems to have been made in consequence of the decision in Chesterman v. Federal Commissioner of Taxation[1]—where the Judicial Committee held that the word "charitable" in the earlier Act was used in its technical legal sense, as in the Statute of Elizabeth, and not in the narrower sense of the relief of poverty or destitution—and of the remarks of Isaacs J. in Young Men's Christian Association of Melbourne v. Federal Commissioner of Taxation[2]. In Adamson's Case[3] the Judicial Committee also held that the expression "charitable institution" must be taken in its technical legal sense unless a contrary intention appear. Now we have to consider the expression "public benevolent institution." It cannot be said that this expression has any technical legal sense, and therefore it is to be understood in the sense in which it is commonly used in the English language. There is no definition in the Act of the composite expression, nor is it to be found in any dictionary. It is, however, found in the Act under consideration in association with such institutions as public hospitals and with funds established and maintained for the relief of persons in necessitous circumstances in Australia. In the context in which the expression is found, and in ordinary English usage, a "public benevolent institution" means, in my opinion, an institution organized for the relief of poverty, sickness, destitution, or helplessness. The Royal Naval House has none of these characteristics: it is organized for the accommodation and recreation of the naval forces of His Majesty and its hospitality is also extended to the naval forces of other countries. It would surprise English-speaking people, I think, to learn that in the Royal Naval House naval forces are accommodated and entertained at a public benevolent institution.

Sec. 8 (5) of the Estate Duty Assessment Act 1914-1928 provides that estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific or public educational purposes in Australia, or to a public hospital or public benevolent institution in Australia, or to a fund established and maintained for the purpose of providing money for use for such institution, or for the relief of persons in necessitous circumstances in Australia.

The question upon this appeal is whether an institution called Royal Naval House is a public benevolent institution within the meaning of the exemption. The nature and the purposes of the institution are fully described in the case stated, and it cannot be denied that it is organized and conducted out of feelings of goodwill in order to promote the comfort and happiness of the lower ranks of the Royal Navy. Because of its association with the various Governments, and because it is concerned with the naval forces of the country, it would be difficult, if it be a benevolent institution, to deny it the description "public." But, in my opinion, it is neither promoted nor conducted for the relief of poverty, distress, suffering or misfortune, and the question is whether for this reason it lacks the qualities necessary to bring it within the meaning of the compound description "public benevolent institution." The words "benevolent institution" are commonly used in combination to denote bodies organized for the relief of poverty or of distress. Familiarity with the application of the expression to bodies of this kind inevitably tends to make the use of the phrase appear misplaced in relation to bodies which do not relieve poverty or misfortune and merit the description "benevolent" only because their objects are benignant. It is said, however, that after all "benevolent" is an ordinary English adjective, and that frequent application of a compound expression of which it forms a part to one or some of many classes of things possessing the attributes it connotes affords no sufficient reason for restricting the meaning of the expression. In such matters one must often be guided to a great degree by one's own experience in the use of terms. In the present case little help is provided by dictionaries, statutory usage, or judicial decision. For my part the application of the expression "benevolent institution" to such organizations as Royal Naval House seems odd and inappropriate. Moreover, I agree with the suggestion of my brother Starke that the history of the provision in sec. 8 (5) of the Estate Duty Assessment Act 1914-1928 is enough to show the word "benevolent" does not there possess its general descriptive meaning; because if it were given such an interpretation its application would extend in some ways far beyond the legal meaning of the word "charitable." After the expression "charitable purposes" in sec. 8 (5) of the Estate Duty Assessment Act 1914 received in the Privy Council in Chesterman's Case[4] its wide legal meaning, and after the observations of Isaacs J. in the Young Men's Christian Association Case[5], the present provision was substituted by sec. 5 of Act No. 47 of 1928. Having regard to this history of the legislation and to the considerations I have mentioned, I am unable to place upon the expression "public benevolent institution" in the exemption a meaning wide enough to include organizations which do not promote the relief of poverty, suffering, distress or misfortune.

The Royal Naval House stands on land situate in the City of Sydney. The Lords Commissioners of the Admiralty, the Government of the State of New South Wales, the officers and men of the Royal Navy and the general public of the State assisted in providing the funds necessary for the erection of the building and certain later alterations to it. The land was made available by the Government of New South Wales and the title is vested in a public authority representing that Government. The building on it is used for the benefit of the petty officers and lower ratings of His Majesty's Navy by providing accommodation and recreation for them when ashore. No written constitution or trust deed is in existence but the House is controlled by honorary trustees and committees, and representatives of His Majesty's Australian Navy assist in its control.

The services of the House are largely availed of by the petty officers and men of His Majesty's and His Majesty's Australian Navy, and when warships from foreign countries visit Sydney Harbour, the lower ratings are also allowed to use the House.

Charges are made by the governing authority of the House for sleeping accommodation, for meals, for baths, for billiards and for lockers but money and valuables of the sailors are taken care of free. The charges are described as small (everything is relative—a bath costs sixpence) but it is noteworthy that in the year 1929-1930 the amount received in respect of such charges was £3,202, while the total expenditure for that year was only £3,589, including a salary and wages bill of £2,251. No rent is paid to the Government of New South Wales and the loss on each year is apparently made up by a small grant of £250 from the Commonwealth Government and by subscriptions and donations. One special concession has been stressed in argument: when men ask for a bed for the night, they may obtain it on a promise to pay on the next pay day. These promises are usually honoured.

Is the Royal Naval House a "public benevolent institution" within the meaning of sec. 8 (5) of the Estate Duty Assessment Act 1914-1928? No doubt, the body both in origin and function has had a sufficiently "public" character impressed upon it. But is it a "benevolent institution"?

The House of course serves very useful purposes. It is convenient that the lower ratings in actual naval service should have an inexpensive hostel available to them when on leave from their ships in Sydney. If they take leave overnight they might otherwise have to seek for places of accommodation at hotels or other places in city or suburbs. The Naval House, no doubt, has become to a large extent the club of those who are accorded its privileges. It probably enables the officers in control of His Majesty's ships of war to get quickly in touch with men required to return at short notice from leave.

There is no element of profit-making in the concern, but the receipts from service charges make the House nearly self-supporting. It resembles in this respect, bodies founded at Australian Universities by State or governing authorities in order to benefit the undergraduates. They are sometimes self-supporting; often they are not, because charges made for services are as small as possible. Halls and rooms are there used for lectures and debates but no one (except perhaps a student in sarcastic vein at a debate) would describe them as "benevolent institutions." Yet students are as a class notoriously impecunious, much more so than the naval ratings in regular employment at a pay fixed by Government.

There are, however, very many bodies which readily answer the description of "benevolent institutions." The Benevolent Society of New South Wales provides food and clothing for those in poverty and distress, the Scarba Home takes care of deserted babies, many organizations of Church and State provide for the maintenance, housing and relief of the aged poor, orphans and those suffering from bodily or mental disease. A characteristic of most of these organizations is the absence of any charge for services or the fixing of a purely nominal charge.

Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves.

Those who receive aid or comfort in this way are the poor, the sick, the aged, and the young. Their disability or distress arouses pity, and the institutions are designed to give them protection. They are very numerous—"the nobler a soul is the more objects of compassion it hath"—and they have come to be known as "benevolent institutions."

Such a phrase seems to me to be impossible to apply to the Royal Naval House at Sydney. It is in truth a cheap and convenient club-house for those in regular naval services and pay and for no one else. The public encouragement evidenced in its formation and running is in part a gesture of hospitality, in part a recognition of the debt owed by the community to those who are serving it. The rating, paying for his bed and board, using the services provided at the rates fixed, would, I think, greet the statement that he had been staying at a "benevolent institution" with amazement, perhaps with indignation. For he is not a person in distress. On the contrary he is a chosen and active protector of the nation, the object not of compassion but of admiration. Neither the public spirit of those who started and those who control the institution nor the convenience or benefit it is to the ratings, is sufficient to make it a "benevolent institution." It is probably because of the fact that it is a social institution rather than a benevolent institution that it is so attractive to naval men and so useful to the Navy itself.

The appellant, which is the executor of the will of the late Arthur Ernest Hezlet, claims that a bequest of one quarter of the residuary trust funds in the testator's estate, which was bequeathed by him to the Royal Naval House, Grosvenor Street, Sydney, is exempt from the assessment or payment of estate duty under the Estate Duty Assessment Act 1914-1928, on the ground that the Royal Naval House is a "public benevolent institution in Australia" within the meaning of sec. 8 (5) of the above-mentioned Act. It was contended on behalf of the respondent that a public benevolent institution is an institution which ministers to the poor and needy, and that therefore on the facts and circumstances disclosed by the special case the appeal must fail. The phrase "public benevolent institution" is not defined in the Act, nor is it a term of art. There does not appear to be any definite understanding as to what is the precise meaning of the expression. Thus the soundness of the method of approaching the solution of the question for decision in the present appeal, by propounding one test to which the Royal Naval House should answer, may be estimated by a consideration of the following passage from the judgment of Lord Warrington of Clyffe in the case of the Girls' Public Day School Trust v. Ereaut[6]. His Lordship said:—"The Act" (Income Tax Act 1918, 8 & 9 Geo. V. c. 40) "contains no definition of public school, and it is therefore the function of the tribunal in each case to say whether the school in question is properly so described. In arriving at a conclusion there are obviously many elements to be taken into consideration, and to say that, whatever the other circumstances may be, the existence or non-existence of one element affords an irrefutable test is open to the objection that by doing so the tribunal pro tanto binds itself by a definition which the statute does not contain." The Royal Naval House has, in my opinion, characteristics which entitle it to be described as "public" (Shaw v. Halifax Corporation[7]; Girls' Public Day School Trust v. Ereaut). Judicial authority however affords no such clear guidance as to what the expression "public benevolent institution" signifies.

Some instances may be given of the use of the word "benevolent" in the statutes of this and other States of the Commonwealth as an adjective qualifying the words "institution," "society" and "asylum." In McLaughlin v. Council of the Municipality of Randwick[8] Campbell J. decided that an institution known as "Our Lady's Home" was a "public benevolent institution" within the meaning of sec. 132 (1) (d) of the Local Government Act of New South Wales, No. 41 of 1919. The special case upon which his Honor gave his decision stated:—"The institution known as Our Lady's Home is an establishment for nurses" who "went out and nursed the sick poor in their own homes. It is a home for nurses to live in and is supported by voluntary contributions from the general public. The nurses live permanently and free on the premises, and get board and lodging and are clothed by the institution but receive no remuneration. The institution does not receive money from patients and does not minister to those who can pay. The nurses are obliged to be Roman Catholics but do not take any religious vows. Members of all religions are treated." His Honor said[9]:—"I think the association, voluntary as it is, with its declared objects and its actual operations, is a public benevolent institution, and the only question seriously argued before me was whether the purposes of the institution could be said to extend to and include the occupation of the subject property by the members, primarily as a headquarters and residence. I think they can." His Honor held that the housing of the establishment was a vital part of the purpose of the institution, and for that reason decided in its favour. The preamble of the Benevolent Society of New South Wales Act 1902, which is "an Act to incorporate and otherwise promote the objects of the Benevolent Society of New South Wales," has the following recital, inter alia, namely, "Whereas a society was in the year one thousand eight hundred and nineteen established, known as the Benevolent Society of New South Wales, having for its object the relieving of poor, aged, and distressed persons and others requiring such aid:" Sec. 5 of the Child Welfare Act 1923 of New South Wales contains the following definition: "Asylum includes the Benevolent Asylum, every asylum for destitute children, or industrial asylum, and every charitable institution supported wholly or in part by grants from the Consolidated Revenue." The Adoption of Children Act 1925 of South Australia (sec. 15 (1)) is in these terms: "Upon the application in writing of the manager for the time being of any benevolent or other institution, established in connection with any religious denomination, who is desirous of adopting any deserted child in connection with such institution, any Court on being satisfied—(a) that such child is deserted; (b) that such child is of the same religious denomination as that of the institution whose manager makes the application, and (c) that such institution is properly conducted, and is capable of properly bringing up such child, may make an order authorizing the manager for the time being of such institution to adopt such child in connection with such institution, such child retaining his or her own name, and in no manner inheriting or succeeding to any property, real or personal, or otherwise howsoever, of such manager or institution." Another instance is sec. 3 of the Hospitals and Charities Act 1928 of Victoria: "Benevolent Society means any society or association of persons the funds of which are obtained in whole or in part by voluntary contributions and which has as its object or among its objects the affording of charitable relief to diseased infirm incurable poor or destitute persons (including children) and is not exempted from the operation of this Act; but does not include—(a) any institution within the meaning of this Act; (b) any such society or association whose funds are wholly obtained from collections made at religious services; or (c) any association of two or more persons acting together temporarily for any specific charitable object." The Hospitals and Charities Act 1928 of Victoria, sec. 67 (1), provides under the heading "Philanthropic Societies or Associations" that "any society or association of persons formed or to be formed having for its object the saving of human life, the promotion of health temperance or morality, the prevention of cruelty or vice, or other cognate objects of a philanthropic or humane nature, shall subject to the requirements as to voluntary contributors contained in Division one of this Part as to institutions capable of incorporation thereunder be and be deemed to be an institution capable of incorporation under this Part and may be incorporated accordingly." Sec. 8 (4) of the Friendly Societies Act of Queensland, 58 Vict. No. 17, provides that societies for any "benevolent or charitable purposes," therein called "benevolent societies," may be registered under that Act. The word "benevolent" or "benevolence" appears in the following statements, which have been culled from the decisions. In the Commissioners for Special Purposes of Income Tax v. Pemsel[10] Lord Watson said:—"I have been unable to find that the word charitable, taken by itself, has any well-defined popular meaning in Scotland or elsewhere. It is a relative term, and takes its colour from the specific objects to which it is applied. Whilst it is applicable to acts and objects of a purely eleemosynary character, it may with equal propriety be used to designate acts and purposes which do not exclusively concern the poor, but are dictated by a spirit of charity or benevolence." In Attorney-General for New South Wales v. Adams[11] Higgins J. said: "But gifts to assist people who are not poor are not charitable, though they may well be benevolent or philanthropic." His Honor was explaining the technical meaning of the word "charitable." At p. 131 his Honor said: "Again, a club for ex-militia officers, merely because they have been militia officers, and irrespective of their wealth and poverty, could hardly be called a charitable institution, though it may be benevolent."

Mr. Jordan has submitted that the meaning of the expression "public benevolent institution" should not be construed by piecing together the respective meanings of the three words of which it is composed. That submission is, I think, a sound one. It should be noted, however, that the dictionaries do not strictly confine the meaning of "benevolent" or "benevolence" within the area of purely eleemosynary acts. In the Oxford Dictionary, "benevolent" is said to mean: "desirous of the good of others, of a kindly disposition, charitable, generous." In the same dictionary "benevolence" is said to mean:—"1. Disposition to do good, desire to promote the happiness of others, kindness, generosity, charitable feeling (as a general state or disposition towards mankind at large). 2. Favourable feeling or disposition, as an emotion manifested towards another; affection; goodwill (towards a particular purpose or on a particular occasion). 3. An expression of goodwill, an act of kindness; a gift or grant of money; a contribution for the support of the poor." Indeed, the signification of the word "benevolent" has been said to be influenced by the substantive to which it is attached. "But, even upon this assumption, the appellant's difficulties are not removed, for this reasoning would not endow the word benevolent with the same signification, when it is—as it must be in the present will—attached to the word objects, and their Lordships cannot accept the appellant's argument that if benevolent institutions and benevolent associations in New Zealand are properly regarded as charitable this involves the conclusion that benevolent objects, where the adjective has no such local limitation of meaning, are necessarily charitable also" (Attorney-General for New Zealand v. Brown[12]).

It does not appear to me that there is any "common understanding" (Girls' Public Day School Trust v. Ereaut[13]) of which the Legislature must be taken to have had cognizance that an institution would not be properly described as a "public benevolent institution" unless its object was to minister to the poor and needy members of society. There appears to me to be much force in the submission of Mr. Maughan that if the expression "public benevolent institution" bears the meaning for which respondent's counsel contends, the concluding words of the sub-section, namely, "or for the relief of persons in necessitous circumstances in Australia" are unnecessary. However, it cannot be predicated that the Legislature always intends to use mutually exclusive words in a context such as that contained in the sub-section. (See Chesterman v. Federal Commissioner of Taxation[14])

"Public benevolent institution" is, in my opinion, a wider term than "benevolent asylum." I do not imagine that it is possible to enumerate all the services which may be rendered by human benevolence operating through the agency of a public benevolent institution. While I do not think that the Legislature intended strictly to confine the exemption to gifts to an institution of a strictly eleemosynary character, yet it may be difficult to bring within the scope of the exemption which has been granted in aid of a public benevolent institution, a gift to an institution which is of a public character, but does not exist for the relief of distress or misfortune occasioned by poverty. But, I am of opinion, that the present case is one in which such a difficulty is disposed of by the facts and circumstances stated in the special case.

It was decided in Chesterman v. Federal Commissioner of Taxation[15] that the word "charitable" which was in sec. 8 (5) of the Estate Duty Assessment Act 1914 must be construed in its technical sense. The last-mentioned sub-section was in these terms: "Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, charitable or public educational purposes." Subsequently the Parliament repealed that sub-section and enacted sec. 8 (5) of the Estate Duty Assessment Act 1914-1928. A comparison of the two sub-sections appears to show that the Legislature intended to exclude from the benefit of the exemptions granted by the Act a number of gifts which, though good charitable gifts in the technical sense, were not for religious or scientific or for public educational purposes or were not made upon the principle of giving direct relief or assistance to mankind in sickness or in need.

The men for whose care and assistance the Royal Naval House is established have as a class peculiar needs and disabilities, which arise from the circumstances of their calling. By affording accommodation, protection and comfort necessary to provide for those needs, and to avert the consequences of those disabilities, the Royal Naval House is, in my opinion, exercising a function which distinguishes it as a "public benevolent institution." In view of the identity of the class to whose needs it ministers, this institution is perhaps sui generis. It has been established to provide for the petty officers and lower ratings of the Royal Navy, and the Royal Australian Navy, and for the petty officers and men, who serve on the public ships of other nations, which visit Sydney from time to time. If this institution were not open to them, these men would be left to their own devices when they came ashore, and they would be exposed to dangers, temptations and impositions, from which this "House" safeguards them. The special case indicates that the institution would not be able to sustain the financial burden of its operations if the land upon which it is built had not been granted to it by the State, and if it did not receive an annual subsidy from the Commonwealth and donations from the public. The fact that it makes a charge for some of the services which it renders does not destroy its character as a "benevolent institution" (Borough of Leichhardt v. Moran[16]).

Seamen engaged on merchant ships have been recognized by the Legislature as a class which needs special protection. Thus, the Merchant Shipping Act 1894 contains, inter alia, provisions for the protection of seamen from imposition (secs. 212 and 163). Under sec. 214 the Board of Trade or a local authority may make by-laws relating, inter alia, to the licensing, inspection and sanitary conditions of seamen's lodging-houses. Lodging-house keepers may be fined for charging a seaman for a longer period than that for which he has resided in the house, or for detaining money or effects in payment (secs. 215, 216). It is also an offence to solicit a seaman to become a lodger, within twenty-four hours of the arrival of the ship at a home port, or to go on board for such purpose without leave when a ship is about to arrive, is arriving or has arrived at the end of her voyage (secs. 217, 218). Division 16 of Part II. of the Navigation Act, passed by the Parliament of the Commonwealth, which is entitled "Protection of Seamen" contains provisions, a number of which are similar to those which have been made in the Merchant Shipping Act for the protection of seamen, and the Governor-General was empowered by sec. 425 to make regulations, inter alia, for the inspection, management and control of seamen's homes.

It is interesting to recall the views of Lord Chancellor Hardwicke expressed in Baldwin and Alder v. Rochford[17], in which the plaintiffs who were sailors on board the "Prince Frederic" privateer, "which took a great prize called the Marquis D'Antin the cargo whereof was chiefly gold" claimed that a contract with them for the sale of their prize-money be set aside "upon the foot of imposition and public inconvenience." His Lordship said:—"There cannot be a more useful set of men to the public, nor a more unthinking sort of people, than common sailors, who, as soon as ever they get on shore, for the sake of a little immediate pleasure are willing to part with their right to anything in expectation, for a very little in possession; and this is the sense of the Legislature, both from the Stat. 1 Geo. II., and the 20 Geo. II., c. 24, whereby they have taken notice of them as a set of men not fit to take care of themselves, and therefore have taken care of them against themselves. I do not say that every contract with a sailor is void, or ought to be set aside, but every contract with them must be fair. A sailor shall not be held to bail for less than £20, and therefore nobody will lend one of them twenty shillings unless he gives his note for £20, which none of them ever refuse, and do it every day in Wapping, which shows what I have before said to be true, that they will do anything for a little ready money to enable them to take their pleasure."

The men who resort to this Royal Naval House are placed in such a position by the circumstances of their calling, that they have a special need of the assistance which this Royal Naval House provides for them; and while it provides that assistance, in my opinion, that part of an estate which is given to it, is entitled to be exempt from estate duty on the ground that the gift is made to an institution of the kind which the Legislature intended to denote by the expression "public benevolent institution."

No argument was addressed to us, on behalf of the appellant, in support of an affirmative answer to the second part of the question contained in the special case. Upon the view I have taken, I do not deem it necessary to answer that part of the question. The first part of the question, that is to say, whether the bequest of one-fourth of the residuary trust funds in the estate to the Royal Naval House, Grosvenor Street, Sydney, is a bequest to a public benevolent institution in Australia, should, in my opinion, be answered in the affirmative.

Question answered: No. Costs of case stated costs in the appeal. Refer this opinion back to the original jurisdiction.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.

[1] [1925] UKPCHCA 2; (1926) A.C. 128; 37 C.L.R. 317.

[2] [1926] HCA 2; (1926) 37 C.L.R. 351, at p. 359.

[3] (1929) A.C. 142.

[4] [1925] UKPCHCA 2; (1926) A.C. 128; 37 C.L.R. 317.

[5] (1926) 37 C.L.R., at p. 359.

[6] (1931) A.C. 12, at p. 27.

[7] (1915) 2 K.B. 170.

[8] (1926) 43 N.S.W.W.N. 165.

[9] (1926) 43 N.S.W. W.N., at p. 166.

[10] [1891] UKHL 1; (1891) A.C. 531, at p. 558.

[11] (1908) 7 C.L.R., at p. 130.

[12] (1917) A.C. at pp. 397-398.

[13] (1931) A.C., at p. 28.

[14] (1926) A.C., at p. 132; 37 C.L.R., at p. 320.

[15] [1925] UKPCHCA 2; (1926) A.C. 128; 37 C.L.R. 317.

[16] (1904) 4 S.R. (N.S.W.) 361.

[17] [1799] EngR 31; (1748) 1 Wils. K.B. 229, at p. 230; [1799] EngR 31; 95 E.R. 589.

High Court of Australia

Perpetual Trustee Co Ltd v Federal Commissioner of Taxation [1931] HCA 20; (1931) 45 CLR 224 (4 June 1931)

HIGH COURT OF AUSTRALIA